Mr. Bric Smashes a Window
At a ridiculous charade called the "St. Petersburg Economic Forum" over the weekend Goldman Sachs Group Inc. Chief Economist Jim "Mr. Bric" O'Neill stunned the host nation by laying Russia low.
O'Neill said: "Oil prices will definitely not do what they've done the past 10 years, and that's not going to be great news for Russia" because it "doesn't have the same advantages over the next decade' as China and India, which will benefit from larger workforces and greater productivity. Russia's gross domestic product will likely grow 3.3 percent a year from 2010 to 2015 and 2.9 percent a year during the following five years."
It would actually be even worse for Russia if oil prices did continue to rise just as they have over the past decade. If that happened, crude oil would become far to expensive for the market to support, and the market would be obliterated, as would the global economy. But left on it's own, with no help from world oil prices, the Russian economy is quite simply doomed to failure, because Vladimir Putin has done nothing to reform or improve it. Instead, just like his Soviet ancestors, he's chosen to devote Russia's resources to a new cold war with the hated United States, hoping to get it right this time. This was illustrated nicely over the weekend when Sberbank head German Gref stated that "Russia's lack of infrastructure, high income growth and shortage of skilled labor indicated the economy is already in the process of overheating." Medvedev's Economics Minister quickly denounced this statement. And demographics are not the only problem. The Russian workforce has always been far less efficient on a per capita basis than those in the West, and this is due not only to laziness but also to corruption. A senior Russian prosecutor claimed last week that corrupt government officials steal as much as $120 billion from the Russian budget each year. So much for Russian patriotism!
A story in the New York Times about the Forum began: "The lineup told it all about Russia’s importance today. There, on one stage, sat the leaders of BP, Royal Dutch Shell, Chevron, Exxon Mobil, ConocoPhillips, Total, Schlumberger and Dow Chemical, as well as the chairman of the Russian energy giant Gazprom and the president of the Russian oil company Lukoil." Indeed, it does tell all. And "all" is that Western oil companies have lots of ready cash due to the spike in oil prices, and they're looking for any means possible to expand capacity -- including even plonking some money down in the gambling casino known as the Russian economy. Not one of these views Russia as being a responsible economy or political system. Each one knows, like any casino gambler, that at any moment they can lose their entire investment to any manner of bizarre arbitrary political event. But the simply don't care. An economy that takes pride in generating investment of this kind is an economy not long for this world.
The Times also reports:
So let's see if we understand. Medvedev, a so-called liberal, uses his first major exposure to the West to attack it. And an actual liberal speaks to half-empty room. That pretty much sums up the value of what we've heard from the Russophile collaborators, that Russia now has new leadership we can make progress with, now doesn't it?
In a speech on Sunday that was keenly awaited by liberals in Russia’s business elite, a first deputy prime minister, Igor Shuvalov, listed the “many hurdles” on this path: an over-reliance on energy exports, a falling population, a lack of modern skills, an unhealthy way of life and a state apparatus with a tendency to meddle. “Russia should be a country that people want to live in,” Mr. Shuvalov said in remarks that seemed uncharacteristically self-deprecating for a top Russian official these days.
Mr. Shuvalov’s audience filled less than half of the hall. It had been packed on Saturday when the new president, Dmitri A. Medvedev, took subtle aim at the United States, suggesting that the world might be in the worst economic crisis since the Great Depression and that a revived Russia could offer solutions to problems that have underscored America’s shortcomings.
Russia isn’t immune from the business cycle, nor is it immune from the consequences of being governed by a clan of KGB spies with no more idea of economics or how to run a business than of brain surgery. Russians routinely claim that their nation can’t be governed as a democracy, but the example of India proves how ridiculous that claim really is. With nearly ten times as many people and a much more vibrant and diverse socioeconomic landscape, India nonetheless manages to maintain democracy and promote a vibrant economy — even stepping all over Russia in the area of computer science, where Russians supposedly excel. With its massive workforce and willingness to embrace pluralism and hard work, India is on track to rocket past Russia in terms of development and obliterate it as an economic competitor on the world stage.
And yet it is Russia, not India, that sits on the G-8. History will view this outrage — which not only slights India but encourages a crazed regime in Russia to maintain the malignant status quo — as one of the great errors of this century. Republican John McCain is precisely correct to call for Russia’s ouster and replacement by India. One can only hope he prevails in the fall, or that his rival Barack Obama will adopt the same policy.